Competition leads to record expenses for Korea’s P&C insurers

Expenses at Korea’s P&C insurers are expected to reach a record high in 2018.

Market and Financial Supervisory Service sources said last week that the net business expenses of 11 non-life insurance firms stood at W11 trillion (US$9.8 billion) at the end of September 2018, an increase of 9% from a year earlier, according to BusinessKorea.

The cumulative business expenses at the end of the year is forecast to reach a record-breaking W15 trillion, surpassing W13.78 trillion in 2017.

Business expenses are surging each year as a result of insurers concentrating on growing their market share.

Market analysts said that directly incurred sales expenses, which account for 70% to 80% of the total business expenses, greatly increased year-on-year. Some P&C firms saw their direct sales expenses, which include commissions to agents, grow nearly W100 billion during the first three quarters of last year compared to 2017.

Such intense competition is likely to increase in the future as a result of market saturation. Therefore, more incentives might be given to agents to help drive sales targets.

In December last year, the Financial Supervisory Service told three P&C firms to present management improvement plans, though these are not legally binding.